Singapore, June 13 (BNA): Oil prices rose on Tuesday amid bargain hunting, returning some of their gains from the previous day’s decline, but the gains were limited as investors remained cautious ahead of major policy decisions by the US Federal Reserve and other central banks.
Brent crude futures rose 77 cents, or 1.1 percent, to $72.61 a barrel by 0640 GMT. The price of US West Texas Intermediate crude was $67.68 a barrel, up 56 cents, or 0.8%, Reuters reported.
Both benchmarks fell around $3 a barrel on Monday after analysts highlighted rising global supplies and concerns about demand growth ahead of key inflation data and the two-day Federal Reserve monetary policy meeting that concluded on Wednesday.
“Some investors looked for deals after the previous day’s sell-off, while others reversed their positions on speculation that Saudi Arabia may cut production further,” said Tatsufumi Okoshi, chief economist at Nomura Securities.
He added that oil prices may fall further due to China’s faltering economic recovery, and predicted that WTI would trade in a range between $62.50 and $75 per barrel during the summer, but essentially below $70 per barrel.
Most market participants expect the US central bank to leave interest rates unchanged at its policy meeting. Interest rate hikes by the Federal Reserve have boosted the dollar, making dollar-denominated commodities more expensive for holders of other currencies and affecting prices.
The European Central Bank is expected to raise interest rates by another quarter of a percentage point on Thursday to calm stubborn inflation. But the Bank of Japan, which will announce its plan on Friday, is expected to maintain its ultra-loose policy.
In China, disappointing economic data last week raised concerns about demand growth in the world’s largest crude importer, offsetting higher prices from Saudi Arabia’s pledge to cut production further in July.
Nomura’s Okoshi said the market is also awaiting demand forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency, scheduled for later on Tuesday.
“In our view, the recent drop in oil prices increases the possibility that Saudi Arabia will at least extend the supply cuts currently in place for July,” National Australia Bank analysts said in a note.
“On this basis, market speculation about the possibility of further supply cuts at the next OPEC meeting is likely to cause volatility in oil prices.”
Saudi Arabia said last week that it would cut its production in July by 1 million barrels per day (bpd) to 9 million bpd, its biggest cut in years, in a move to boost prices.
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